Multi-Housing News - October 2009 - (Page 22)

market forecast Back From the Brink Midwest apartment markets are showing signs of improvement since the auto industry restructuring By Erika Schnitzer, Associate Editor Just a few months ago, the Midwest was making headlines nearly every day, with reports of the auto industry on the verge of collapse. It was no wonder, then, that Detroit’s unemployment rate was the highest in the nation, and industry experts reported that the future of multi-housing in the city depended on whether General Motors and Chrysler survived. Now, with the two major auto companies coming out of bankruptcy, some optimism and stability have returned to the marketplace, reports Kevin Dillon, associate partner in Hendricks & Partners’ Birmingham, Mich. office. The pace of “job losses has declined in the second half [of the year], and that is anticipated to continue.” He adds that the auto makers have increased production, consequently increasing overtime shifts and stabilizing consumer confidence, to some extent. “There is a feeling we have hit bottom and we are coming out of it,” Dillon notes. According to the U.S. Bureau of Labor Statistics figures, the Detroit-WarrenLivonia MSA’s unemployment rate is 17.0 percent, as of August. This is certainly a staggering statistic, however, it is important to note that the rate decreased 0.7 percent from July 2009. Meanwhile, the Chicago-Naperville-Joliet, Ill. MSA recorded a 9.6 percent unemployment rate during the same period, down 1.1 percent from the previous month, and finally putting the city at the same rate as the national average. As Dan Rosenberg, co-founder of Chicago-based Building Equity, points out, “we seem to have a very well-rounded group of industries in Chicago…and the population keeps expanding. You have a huge number of people moving from the suburbs into the city.” And while the Milwaukee-Waukesha-West Allis, Wis. MSA has also seen a decrease in its unemployment rate, it’s one of the few cities in the Midwest whose unemployment is below the national average. As of July 2009, unemployment was at 9.5 percent—down from its high of 9.8 percent in June (at press time, the MSA’s August unemployment rate had not been recorded). Midwestern fundamentals All things considered, the Detroit market is “faring pretty well,” according to Dillon. Perhaps the best explanation is the city’s limited new construction—only five multifamily permits have been issued this year, compared with 435 in 2008. The Detroit apartment market has also seen some stability in rental traffic in the late-second and early-third quarters, Dillon notes, adding that this stability is mostly in the Class B and C sectors. According to Hendricks & Partners’ second-quarter figures, vacancy—as of June 2009—was 7.5 percent, an increase of 80 basis points year-over-year. The Class A market, however, “is still suffering, due to less-expensive homes, foreclosure and higher-end residents buying single-family homes,” reports Dillon. Compounding this is the fact that most of the market’s concessions are seen in the higher-tier properties. Furthermore, while the metro is not experiencing either rent increases or concessions—the year-over-year rent change was down 0.5 percent, or $6 per month—there is an increase in leasing traffic at properties with strong management and good price points, says Dillon. Meanwhile, average occupancies in both Chicago and Milwaukee are above 90 percent—93.3 percent and 95.1 In Milwaukee, 70 percent of the units at Legacy Real Estate Development LLC’s 38-unit The Flatiron have sold. October 2009 | Multi-Housing News

Table of Contents for the Digital Edition of Multi-Housing News - October 2009

Multi-Housing News - October 2009
Contents
From the Editor
Executive Insight
News
Market Pulse
Finance: The Future of the GSEs
Investment: Transactions
Market Report: Midwest
Property Management
Development: Adaptive Reuse
Products
Technology

Multi-Housing News - October 2009